The only way for packagersto stay profitable in the Canadian market is by continuing to find new solutions.
Canadian packaging printers face challenges distinct from those faced by commercial printers, as the package manufacturing process is longer and more complex than for straightforward commercial printers. Yet packagers are consistent in creating eye–catching, attention–grabbing, and problem–solving packages for their clients’ products.
Packagers, like all printers, are under constant pressure to reduce costs and improve quality. The challenges are getting tougher, and also more interesting, as consumers demand more variety in the products they buy, as competition from the U.S. and overseas gets faster, cheaper, and more prevalent, and as domestic environmental and safety concerns begin to affect manufacturing processes.
Soft market
“The market is a little soft these days, at least in Ontario and Quebec,” says Mark Spurgeon, President of Tri–Ad Graphics, a company that has both commercial printing and packaging divisions; packaging accounts for two–thirds of its total volume. He attributes part of that softness to greater competition from U.S.–based packagers. “The U.S. companies who would previously not be interested in shorter runs are now bidding on them,” he says. About 15 per cent of Tri–Ad’s volume is for U.S. consumption. Canadian packagers have also lost the once–great price advantage they had when the Canadian dollar was worth 70 U.S. cents or less.
“We’ve seen some significant changes in the market over the past two years,” says David Haslam, Director of Specialty Engraving for Southern Graphics in its Mississauga location. “Three or four companies have retreated from the Canadian market, but three or four new ones have entered. Some of the larger companies have consolidated their operations, sometimes moving production to the U.S. facilities or even offshore.”
“You gotta fight for it, but business is out there,” says Gerry Richler, Chairman of Goldrich Printpak Inc. of Toronto.
The challenge of variety
Consumers today are demanding greater variety in the products they buy, and retailers and manufacturers are giving it to them. Twenty years ago you could buy one kind of Special K cereal—now there are at least three. This kind of brand variety is consistent in all sectors: candy, soft drinks, cosmetics, even medical and pharmaceutical products. And every different product requires a different package.
“The volumes might not change, but there are more SKUs [stock–keeping units] than ever before,” says David Haslam. That means smaller runs of different jobs.
Just–in–time manufacturing is also having an impact on packaging. “People use to print to inventory, then use their inventory of packages up. Not anymore,” says Haslam. Instead, customers want packaging to arrive exactly when they need it.
In contrast, Goldrich Printpak Inc. hasn’t found that clients are ordering short runs. “While some customers are trying to reduce inventory to save costs, they realize that they still need to achieve economies of scale with packaging,” explains Gerry Richler.
Packaging clients are getting more demanding. They want lower costs, faster turnarounds, and greater efficiency. And, of course, top quality.
“Quality…is a given,” says Richler. “If the package isn’t perfect, forget it.”
All packagers recognize the shrinking turnaround times they have to deal with, and the competitive pressures that keep a lid on prices. “Prices have eroded year on year. It’s something we have to find efficiencies in our operations to deal with,” says David Haslam.
Retailers are putting more pressure on their suppliers, and those producers and suppliers of consumer packaged goods are passing on a lot of the pressure back to the packaging companies. “For example, a supplier may ship goods to a retailer’s distribution centre, and the retailer would then apply shipping labels to individual cartons or skids to ship them to different stores,” explains Gerry Richler. “Now, they’re asking us, the packagers, to add those shipping labels.” It may not seem like a big request, but it makes a difference to the product supplier, and packagers that can add this service have a better chance of getting the job.
Innovative packagers see these pressures as opportunities to get more work. “Customers are looking for value–added services,” Richler says. Goldrich Printpak has responded by offering fulfillment services, not only making the packages but also inserting the products, and even shipping them. They’ve also added an e–commerce function, where their client’s customers will send electronic orders to Printpak, who will fill the order and notify their client about the orders, so the client can then process invoices.
Generally, packaging customers are looking to reduce the amount of product handling that they do, and are looking to other companies to do as much as possible. The packager is in an advantageous position to offer more services.
The use of radio–frequency identification (RFID) tags is slowly starting to take off, too. These tiny tags are attached to the outside of packages and broadcast data about the contents of the container they’re attached to; scanners pick up the information and feed it into an inventory or supply–chain management system. This automates much of the information processing in shipping and receiving and reduces errors: the identity, quantity, source and other information of incoming or outgoing products automatically enters a retailer’s or a supplier’s computer system. It can even be used on individual products at the check–out counter, as a faster alternative to bar–codes.
However, despite its benefits, the technology is not taking off very quickly. “The cost of the tags is an issue: if you’re selling a product for a dollar, and the RFID tag costs 50 cents, there’s not much economy in it,” says Richler. As a result, RFID tends to be used on skids, not on individual products.
Environmental pressures
Environmental activists are quick to highlight the waste produced by excess packaging and the thousands of tonnes of cardboard and plastic that regularly go to landfills. Recycling programs do reduce packaging’s environmental footprint, but there is still much government and environmental pressure to further reduce packaging waste.
“Boxboard is a renewable resource,” says Gerry Richler. “A lot of the content that we use is recycled, post–consumer waste, and most of what we produce can be recycled.”
“Customers’ concern about the environmental impact is steady, slowly gaining, but it’s not a huge factor,” says Mark Spurgeon. But that could change very soon. Wal–Mart, the world’s biggest retailer, has announced that it’s going to “measure” the ability of all its worldwide suppliers to develop innovative packaging that conserves natural resources. Wal–Mart is hoping to reduce the total amount of packaging it handles by five percent, starting in 2008.
Achieving Wal–Mart’s goal will reduce pressure on landfills, save about 667,000 tonnes of carbon dioxide emissions, and prevent the burning of 323,800 tonnes of coal and 66.7 million US gallons of diesel fuel.
Wal–Mart drives many trends in retailing and manufacturing. Their push to use radio–frequency identification (RFID) to sp
eed up receiving of products has caused a major increase in RFID use and implementation in many industries worldwide. And if Wal–Mart is leading the way in reducing packaging on its shelves, other retailers and other kinds of companies are bound to follow suit — particularly since environmental awareness has both economic and PR benefits.
A five percent reduction in overall packaging produced will have a major impact on packaging producers—particularly when that’s compounded with the other trends affecting the industry.
Environmental concerns are also pushing printers and packagers away from using solvent–based inks. “Some of our clients have asked us to move away from solvent–based inks to water–based inks,” says Southern Graphics’ Haslam. They’re happy to oblige: not only does it make them better corporate citizens, but there’s little impact on the bottom line. “Water–based inks typically have more pigments, so they’re stronger, and we use less ink in the ink–water balance,” he explains. “With beer labels, it’s important to use water–based inks, because when the bottles are recycled, the labels wash off and the bottlers don’t want the solvent in the inks going into the water.”
Innovations
Packagers are creating innovative packages that use less material, yet provide more protection as well as space for promotional graphics. Goldrich Printpak won awards from the Canadian Packaging Association and a World Star award from the world packaging organization for its patented new box that sports fold–out side panels and presents only one point of entry. “It’s a book style box with ‘wings’ on each side that uses less material yet gives the producer more ‘real estate’ for promotional graphics,” says Richler. Also, since there’s only one way to open the box (many store–shelf boxes have two), it reduces the risk of pilferage.
Innovate for the future
Like commercial printers, packagers depend on emerging technologies to find new, more efficient production methods.
At the creative design end, Tri–Ad has started to use new three–dimensional design software from Esko and other companies to create realistic virtual mock–ups of packaging designs. “A three–dimensional model really does more to explain the concept and illustrate how it works for the customer,” says Spurgeon. “Not everyone can see how a flat design will translate into a solid box or package. And it’s not totally for the customers’ benefit — it also helps our designers.”
In the flexographic and lithographic sectors of the packaging industry, businesses are turning to many of the same technologies as commercial printers, particularly computer–to–plate output. “CTP has had a huge impact in terms of quality, efficiency, and speed,” says Goldrich Printpak’s Richler. “Some clients don’t want to use it, and insist on staying with film. But with CTP, if we notice an error in a file on press, we can produce another plate in 20 minutes. If we have to go back to film, well, it can take hours or even days.”
In the high–end gravure sector of packaging, Southern Graphics is starting to use laser systems to etch or expose images on their cylinders; this provides “offset quality with gravure capability” for very long runs and durability, says Haslam.
And in the pressroom, automation and digital increase efficiency in order that packagers may meet rising client demands. The Opaltone seven–colour process printing system, like the Hexachrome six–colour system, helps Tri–Ad reduce costs and boost efficiencies. “It’s not a fit for every job, but it can provide some savings in printing,” says Spurgeon.
Packagers are an innovative bunch. Eroding prices and rising raw material costs continue to challenge them, but successful packagers are finding new ways to innovate and provide more value for their clients.
